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To: arista

Short selling is nothing but selling the same shares twice. Yes they do buy them back, but only after they artificially inflate the float, which drives the stock down. Its a myth that they help the market. Did anyone ever meet a short seller that wanted the market or stock that they sell short to go up? I didn’t think so.


12 posted on 10/09/2008 6:26:37 PM PDT by Racer1
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To: Racer1

Name me one market where all parties wanted the price to go up. Every seller is hoping that he is selling at a peak, every buyer is betting that he is buying at a valley. This is how markets work.


13 posted on 10/09/2008 6:32:21 PM PDT by fhayek
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To: Racer1

Shorts do not sell the same shares twice, they borrow them from someone who actually owns them to sell. They do not affect the float in any way since the shares have to be there to borrow.
Short provide liquidity to the market and trust me when the stock/market is tanking shorts can provide ‘brakes’ when they all start buying to cover.
Yes I am a proud shorter. I prefer it to long any day.


15 posted on 10/09/2008 6:41:11 PM PDT by sheana
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To: Racer1
Short selling is nothing but selling the same shares twice. Yes they do buy them back, but only after they artificially inflate the float, which drives the stock down. Its a myth that they help the market. Did anyone ever meet a short seller that wanted the market or stock that they sell short to go up? I didn’t think so.

Explain why high stock prices are a good thing at any time other than the exact moment when you sell a stock.

If I'm going to dollar-cost average into a stock for 20-40 years and then start taking money out, should I want the stock to go up while I'm putting money in, or should I want it to remain nice and cheap relative to dividends? In what way will having the stock price go higher today allow me to collect more in 20-40 years?

There are only two ways that a speculative market as a whole can make money:

  1. By buying assets at a time of relative surplus, and selling them at a time of relative shortage.
  2. By collecting dividends or other benefits from assets while they are held.
That's it. Dividend profits are of course maximized when prices are low. As for surplus/shortage, speculation can be imagined as a water pipe that moves water from an area in the present to an area in the future. Water must flow from present to future--not backward. Think of the water level as being the inverse of price.

If the water level in the present is higher than in the future, one can collect energy from every gallon that flows. As more speculators enter the market, the "present" level will diminish and the "future" level will rise. If too many speculators enter the market, the "present" levels will be drained below the "future" levels, thus requiring an investment of energy to move the water uphill. The greater the disparity, the more energy is required.

In a sane market, the diminishing "present" water level (increasing price) would be a red flag, telling investors to back off. Unfortunately, bulls that see a red flag tend to charge in instead.

Prices of stock are certainly important when one buys or sells them, but the market price of an asset which one is neither buying nor selling is meaningless. If the vast majority of stock in a company is held by people who intend to keep it until 2015 and then liquidate it by 2020, price fluctuations for the small number of shares that are actively traded won't have any real effect on the value of the non-traded shares. The market may support a bubble when all those trades are on the sidelines, but any bubble is going to burst as soon as anyone tries to liquidate in any major way.

26 posted on 10/10/2008 3:42:01 PM PDT by supercat
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